Looks like the spread on OIIM has closed. Trying to do a little post mortem here, analyzing the risks that did not materialize...
I bought a position around $4.55 after the shareholder's approval at the start of Feb. Spread was still 7%+ after that.
What would be your best guess for this spread still existing? Seemed like a sure thing after shareholder's approval, but I suppose there was still some kind of chance the acquirers walk back on the deal / something crazy happens that blows up the deal?
And then yesterday the share price popped. I didn't see any official news, but saw a tweet that links to nasdaqtrader.com (don't even know if this site is legit :D). This mentions Feb 24 as anticipated last trading date & Feb 27 is suspension date.
The spread is still 1%. Can something still go wrong here? How long does it take to get the $ ? Maybe this uncertainty is why there is still a spread?
Anyway, yesterday I sold all but 1 share, so I can still find out how long it takes
There had been 2 cases where a merger was approved and then basically nothing happened. The first one, CXDC, went all the way to 0. And the second GSMG, had the merger approved and then basically went radio silent for months. And is now trading at a huge spread as well.
I personally had sold out OIIM at $4.78, and then got back in at $4.55 as well.
The main pattern with the 2 mentioned broken mergers above is that the underlying business threw up lots of fraud related red flags and that they were majority shareholder/founder buyouts at an insanely low valuation. So I managed to stay away from these, since if the merger somehow breaks at this obviously insanely low valuation, downside is basically 100%. Since that would make it pretty clear the business is probably overvalued and is in fact a fraud.
When I do merger arbs I want to at least be reassured the underlying business will be worth something, which seemed very questionable with both CXDC and GSMG.
OIIM though did not seem like a fraud and was being bought out by a major state owned investing firm. So I think the risk of them going radio silent after the vote was extremely small.
As for getting the money, I think we will get the money somewhere in late February? A press release mentioned it would stop trading after the 24th I think.
Great to hear from you again. I'm personally happy to read about other subjects as well. Most people subscribe to a Substack to hear someone's voice.
I love your post about DRAM! It's very useful to understand how competition affects return on capital. More of it! :)
PS. STNE is somewhat similar to PAGS, maybe worth a look as well.
We always appreciate your articles. Your openness and honesty are refreshing!
Looks like the spread on OIIM has closed. Trying to do a little post mortem here, analyzing the risks that did not materialize...
I bought a position around $4.55 after the shareholder's approval at the start of Feb. Spread was still 7%+ after that.
What would be your best guess for this spread still existing? Seemed like a sure thing after shareholder's approval, but I suppose there was still some kind of chance the acquirers walk back on the deal / something crazy happens that blows up the deal?
And then yesterday the share price popped. I didn't see any official news, but saw a tweet that links to nasdaqtrader.com (don't even know if this site is legit :D). This mentions Feb 24 as anticipated last trading date & Feb 27 is suspension date.
The spread is still 1%. Can something still go wrong here? How long does it take to get the $ ? Maybe this uncertainty is why there is still a spread?
Anyway, yesterday I sold all but 1 share, so I can still find out how long it takes
There had been 2 cases where a merger was approved and then basically nothing happened. The first one, CXDC, went all the way to 0. And the second GSMG, had the merger approved and then basically went radio silent for months. And is now trading at a huge spread as well.
I personally had sold out OIIM at $4.78, and then got back in at $4.55 as well.
The main pattern with the 2 mentioned broken mergers above is that the underlying business threw up lots of fraud related red flags and that they were majority shareholder/founder buyouts at an insanely low valuation. So I managed to stay away from these, since if the merger somehow breaks at this obviously insanely low valuation, downside is basically 100%. Since that would make it pretty clear the business is probably overvalued and is in fact a fraud.
When I do merger arbs I want to at least be reassured the underlying business will be worth something, which seemed very questionable with both CXDC and GSMG.
OIIM though did not seem like a fraud and was being bought out by a major state owned investing firm. So I think the risk of them going radio silent after the vote was extremely small.
As for getting the money, I think we will get the money somewhere in late February? A press release mentioned it would stop trading after the 24th I think.
Cool, thanks for the elaborate response!
Hmm and spread widened again, delisting date changed to TBA.
Head tells me to get back in, my gut tells me to wait.
As someone with very little experience in the merger arb game:
I will stay away from this one. Announcing a delisting date and withdrawing it, feels suspicious. (but maybe it's not ?)
Situation seems different now compared to buying at $4.55 1-2 weeks ago, before the initial delisting date announcement.
Anyone have any base rate data on announcing a delisting date and then changing it to TBA? :)
But like I said, I have very little merger arb experience: so don't listen to me!
Curious to know what you think of NMIH!
What do you think about Avaya at current price and everything happening?
Did anything interesting happen? Seems like it will be a 0.